Is HAMP A Failure?

November 7 2010 (Chris Moore)
When the Obama Administration launched it’s highly touted home loan modification program, Making Home Affordable Program (HAMP), in February 2009, the goal at the time was to save 4,000,000 homeowners from foreclosure and yet 18 months later just over10% of that goal has been met. When Obama unveiled his signature foreclosure prevention program, he said loan modifications were a key way to prevent the housing crisis from deepening.

As of August 2010, only about 450,000 homeowners in the United States who have enrolled in the program have received loan modifications, which is just 34 percent of the 1.3 million who have enrolled in the program, far below anticipated levels.

The Treasury Department also reports about 680,000 homeowners who applied to get their mortgage payments lowered, or about 51 percent, have been disqualified through August. That’s up from about 48 percent in July.
Many critics say the program has failed to slow the tide of foreclosures, which have battered the housing market and drastically lowered home prices in parts of the country.

And lately the administration has been singing a different tune about the foreclosure crisis. A year ago, officials focused on stemming the foreclosure tide. Now they are touting the need for foreclosures to rebuild the housing market.

Last week Phyllis Caldwell, head of the Treasury Department’s Homeownership Preservation Office, told a congressional panel that “an important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them.”

And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the “recovery in the housing market stops. It’s frozen.”

“That obviously can have — we believe and others believe — a very negative and detrimental impact to our economic recovery efforts and the housing markets in states that have been hardest hit,” Gibbs said.

So has the administration given up on its prized program? Probably not.

The shift in rhetoric signals the Obama administration is recognizing that its loan modification program is foundering, experts said. Also, it is acknowledging that banks must address their swelling ranks of delinquent loans.
To be sure, the administration is still concerned with helping homeowners avoid foreclosure. Officials have rolled out a series of initiatives in 2010 aimed at assisting the unemployed and the underwater that owe more than their houses are worth.

If anything, this is probably what we should have expected from such an inexperienced administration. Undoubtedly the administrations intentions were good, but the reality is capitalism works best when the government stays out of its business and perhaps they are finally starting to seeing that. After all, isn’t this how we got into this mess in the first place? No one wants to see people lose their homes, but in a capitalist economy it’s part of the vetting system, and it also would have been political suicide if this administration had just stood by and done nothing.

Although the numbers that the administration had hoped for have never materialized, any program that can save hundreds of thousands of homeowners from losing their homes should be still be considered a success in its own right.